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By Greg Roumeliotis
(Reuters) – BlackRock Inc <BLK.N>, a Cofence Inc investor, is in talks to take over the US cybersecurity company, after a US national security panel has asked Pamplona Capital Management to acquire it. LLP to sell his stake, said Sunday people familiar with the case.
The Committee on Foreign Investment in the United States (CFIUS), which examines the contracts concluded by foreign acquirers in search of national security problems, did not disclose why it had asked Pamplona to sell its 47% stake in Cofense, based in Leesburg, Virginia, that protects email users from phishing attacks.
This development represents one of the few very well-known examples of CFIUS canceling an agreement already concluded.
Russian billionaire Mikhail Fridman is among the leading investors in private equity funds in Pamplona. He was included in the list of "oligarchs" by the US Treasury Department which could have imposed sanctions on him because of his potential links with the Kremlin.
However, unlike other Russian oligarchs such as Oleg Deripaska and Viktor Vekselberg, Fridman was not hit by US sanctions.
"The process is still ongoing and we are working diligently to find a solution," said Pamplona in a statement, refusing to comment further.
Representatives of BlackRock, Cofense, Fridman and the US Treasury, who chairs CFIUS, did not immediately respond to requests for comment.
Pamplona decided last October to launch an auction process to sell its stake after CFIUS approached him. Pamplona made this decision 10 months after the acquisition of Cofense with BlackRock, along with other investors, including Adam Street Partners and Telstra Ventures, in a $ 400 million transaction (£ 323.2 million) ).
BlackRock, which holds a 30% stake in Cofense, is the favorite to buy Pamplona's stake in an agreement that could be concluded as early as this week, the sources said. However, it is still possible that another bidder wins or the negotiations fail, the sources added, asking not to be identified because the negotiations were confidential.
July 19, deadline agreed with CFIUS to reach an agreement for coofense has already failed. The US government's involvement, which has formed an attorney with the company to oversee the sale, complicates the negotiations, sources said.
The protracted process also weighs on price negotiations. Pamplona is negotiating with BlackRock a deferred payment mechanism that will be based on Cofense's future financial performance, which it hopes will eventually lead to a higher transaction value than the investment of the year. last, said these same sources.
However, it is also possible that the agreement will end up valuing Cofense, which was previously known as Phishme, lower than last year's $ 400-million valuation, the sources added.
Pamplona and BlackRock have not looked for CFIUS approval when they finalized their contract with Cofense last year, because the control system is voluntary and the companies thought that no national security issues would be raised, according to the sources.
The companies have trusted Cofense's management team, which also owns a stake in the company, to run the business, the sources added.
CFIUS has made cybersecurity and the protection of personal data its top priority in recent months. The 2019 world intelligence threat badessment report of the US intelligence community cited Russia's efforts to interfere in the American political system.
In another example this year CFIUS seeking to unravel an acquisition, he asked the Chinese gaming company Beijing Kunlun Tech Co Ltd to sell Grindr LLC, the popular gay dating app it has owned since 2016. Grindr collects personal information submitted by its users, including the person's location, messages and, in some cases, the HIV status.
Last year, CFIUS has launched a pilot program in which filings for consideration of certain types of investments in certain US technology companies that it deems to be of critical importance are no longer optional.
ALFAGROUPCONNECTIONS
Fridman and its partners control the Alfa Group, which includes the leading Russian private bank Alfa Bank, its largest food retailer X5 Retail Group and other badets.
Fridman, whose net worth is estimated at $ 15.9 billion by Forbes, is also one of the largest shareholders of LetterOne, which invests in the energy, telecommunications, technology and energy sectors. other.
Pamplona was founded in 2005 in London by the British negotiator Alexander Knaster, born in Moscow. CEO from Alfa Bank from 1998 to 2004. Last year, Knaster entrusted co-managers Martin Schwab and William Pruellage with the day-to-day management of Pamplona.
Knaster remains president of Pamplona, which manages more than $ 12 billion in badets across several funds.
BlackRock, the world's largest badet manager, is best known for being a mutual fund provider, but has also been investing in private equity since 1999. This year it raised $ 2.75 billion. for a long-term private equity fund with an interim fundraising goal. $ 10 billion.
(Report by Greg Roumeliotis in New York, edited by Lisa Shumaker)
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